Memorandum by the Consul at Osaka (McConaughy), Temporarily in the United States

Observations on the Japanese Political Situation as Noted in Western Japan

The following comments are offered merely as background material. While it is presumed that they will only confirm and supplement information already on hand, they are submitted as first-hand observations. The undersigned left Osaka on September 14, 1940, and all conclusions drawn are as of that date.

A disturbing aspect of the present Japanese scene is the recent trend toward unqualified endorsement of current Japanese foreign policy by the liberal and moderate elements which formerly comprised a passive but substantial opposition. As examples of this development there may be cited: (1) Emphatic private assertions that the United States must acquiesce in the Japanese program, made by men (such as Ogura of Sumitomo Honsha, Takaishi of the Osaka Mainichi, Nango of the Japan Cotton Company, and Kanzaki of Kansai Gakuin University) who in 1937 and 1938 confidentially voiced regrets and sometimes even mild apologies at the course of Japanese policy; (2) a process of rationalization by many Japanese Christians which has enabled them to justify in their own eyes (on the grounds of “ultimate good”) the aggressive aims of the Japanese Government, and to reject some of the altruism inherent in Western Christianity; (4) [sic] growing hostility toward the United States in the tone of such “conservative” and increasingly influential newspapers as the Osaka Asahi and the Osaka Mainichi, coincident with a greater amenability on their part to the suggestions of governmental agencies primarily concerned with the molding of public sentiment; (5) dedication of teachers, from elementary grade to university professors, to the task of indoctrinating students with the current state philosophy while suppressing freedom of thought ever more rigidly; (6) a tendency to reject further foreign tutelage and assistance where possible, even in fields where a need therefor admittedly still exists; (7) increasing fear by Japanese leaders in all walks of life of the authority of the Japanese gendarmerie and petty officials in the prefectural and economic police; and a more supine acceptance of their narrow point of view, which calls for the general avoidance of casual social contacts with foreigners, and the withholding of commercial and economic [Page 979] information from them, including foreign trade figures. The ready acceptance by the business leaders of the economic control measures is partly motivated by a fear of the internal inflation which would immediately ensue without those measures; (8) failure of Japanese business leaders in Osaka to convince Japanese militarists in China that exploitation measures there (even from the point of view of immediate self-interest) should be carried out in a more conservative manner and with more regard for the interests of Chinese and foreign producers and merchants; (9) a growing assumption that virtually complete autarchy, especially as to imports, within an expanded yen bloc, is a sound ultimate objective of Japanese policy.

Some of the formerly dissident elements no doubt have fallen into line because they believe that the die has been cast; that the national existence of Japan is not interwoven with the success of the present policies; and that resistance at this advanced stage would be unpatriotic if not treasonable.

These elements share with the bolder groups actually controlling the government a dangerous conviction that rapprochement with the United States, when it comes, must be brought about by a reorientation of American policy, with little or no deviation by Japan from the “immutable” line which it has taken.

It should not be assumed, however, that the industrial and financial leaders of Osaka are in complete accord with the point of view of Japanese militarism. Many of these leaders, realizing the degree to which the Japanese farmer is bearing the brunt of the national burden, distrust the avowed agrarian sympathies of the more radical army element, and are disturbed by occasional army advocates of accord with Russia who contend that the Russian system is not Marxist, and that there is little to choose between the present Russian principles of government, and those by which the Japanese state is to be guided. Their generous donations to army funds, over and above their taxes, are partly prompted by a desire to placate the extremist group in the army which would expropriate business.

The conservative business element of western Japan, represented in the present cabinet by Mr. Murata (formerly of the Osaka Shosen Kaisha) and to a lesser extent by Mr. Kobayashi (developer of the extensive Hankyu transportation, amusement, and mercantile chain in Osaka and Kobe), undoubtedly do exercise some restraining and hardheaded practical influence in Tokyo. Mr. Murata as Communications Minister has already taken steps to integrate the shipping industry, and probably will achieve a needed elimination of wasteful competition and duplication of services. Mr. Kobayashi, despite his known admiration for Nazi efficiency, is not yet ready to jettison [Page 980] traditional financial procedures or to embrace the methods of Dr. Schacht35 in their entirety.

Mr. Kobayashi’s acceptance of the chairmanship of the economic mission to the Netherlands Indies was interpreted by some of his acquaintances and by Dutch interests in Kobe having close contact with the Government General at Batavia as an indication that the Japanese plan to avoid military measures in the Netherlands Indies for the present, and to endeavor to achieve their immediate objectives (chiefly long term credits, and increased shipments of textiles to pay for petroleum, rubber and tin, with drilling, mining and rubber growing concessions for Japanese interests a distinctly secondary consideration, if indeed an issue at all) by peaceful means with a minimum of coercion.36

Apart from the representation in the Cabinet, the influence of western Japan has been exerted mainly in the direction of salvaging the foreign trade of Japan. It is still the prime trading area of Japan, and prodigious efforts have been exerted in the promotion of export trade, with some degree of success. Great difficulty has at times been encountered in persuading the central government to rescind measures which tended to stifle export trade, but in general the frequent trips of Osaka merchants to Tokyo have borne fruit, and the producers and export trade associations which have become agencies of the government are helping to enforce the control system.

Osaka influence has been conspicuous in the government decision to permit the importation of sufficient cotton to keep the great cotton spinning industry operating at approximately 50 percent of capacity, despite the presence in Japan of huge, and growing, stocks of unsold piece goods manufactured for export—probably sufficient to satisfy export demand for ten months. The foreign exchange badly needed for other purposes has been allocated to cotton purchases because the cotton industry has apparently convinced the Cabinet that it would be a mistake to allow such a great economic asset (in normal times) as this industry to become moribund, with a consequent serious dislocation of labor and a heavy capital loss, to say nothing of the difficulty of reestablishing the industry should momentum once be lost.

The Osaka influence can also be seen in the drift toward a partial relaxation of the curb on exports to the yen bloc of goods manufactured from raw materials paid for with foreign exchange. Most of the exports to China and Manchuria pass through Osaka, Kobe, or Moji, and are vital to the prosperity of that region. Osaka traders in general have not been impressed with the argument that exports to [Page 981] China and Manchuria should be restricted because no foreign exchange is derived therefrom. They reply that the yen bloc is by nature a principal outlet for Japanese manufactures, and they fear that the great China market eventually may be partly lost to non-Asiatic powers, including Germany, if it is not continuously held by Japan. Osaka business leaders are cautiously resisting the recent trend for the economy, finance and currency of “Manchukuo” to be divorced from that of Japan proper.

Individual buying of government bonds in Osaka appeared to be lagging through the summer, but Osaka banks, trust companies and insurance firms continued to purchase heavily, without outward sign of compulsion.

Although relations of the Japanese leaders in Osaka with American representatives are still on a cordial basis, there is naturally less warmth and more suspicion in the general attitude toward the United States, While American interests there feel that they do not receive reciprocal treatment, there are few if any cases of substantial discrimination against American commercial interests as compared with those of other foreign countries.

The American embargoes and licensing requirements of certain strategic products are resented, but no petty reprisals have been taken.

It is unlikely that the Japanese will boycott American cotton or other raw materials still available to them as a result of the limited steps already taken by the United States.37 The Japanese buy their important raw materials on a basis of pure expediency, rejecting emotional considerations, and resort to a boycott or import embargo only as a very broad instrument of national policy. A cotton boycott might be conceivable if further economic measures should be taken by the United States, and if a sufficient supply of cotton for at least a short period should be deemed available from other sources. As precedents there are the boycott of Indian cotton for a few months in 1934, a similar measure against Australian wool in 1935, and punitive tariff measures against Canada in 1936.

However, prevailing sentiment in west Japan is against any present economic reprisals against the United States.

  1. Hjalmar Schacht, German Minister without Portfolio; president of the Reichsbank, March 1933–January 1939.
  2. See also pp. 565 ff.
  3. See also pp. 565 ff.